deferred compensation

Deferred compensation

An amount that has been earned but is not actually paid until a later date, typically through a payment plan, pension, or stock option plan.

Deferred Compensation

Money or other compensation that has been earned but not yet received by the earner. Deferred compensation is not taxed until it is actually received, and is usually taxed at a lower rate when it is received (depending on one's income later in life). The most common form of deferred compensation is a retirement plan such as an IRA or 401(k), but stock options and other pensions also qualify.

deferred compensation

Compensation that is being earned but not received, a process that defers the taxes on the compensation until it is actually received at a later date. Deferred compensation includes various plans, some being pensions, profit-sharing, and stock options.

deferred compensation

payment schemes that pay lower wages during the early years of employment in an organization and higher wages in subsequent years. With deferred compensation schemes, a worker's remuneration increases with seniority and experience, which tend to improve the worker's efficiency within the organization. Such compensation schemes tend to reduce labour turnover and reduce SHIRKING. See PAY.

Deferred Compensation

Compensation that will be taxed when received or upon the removal of certain restrictions on receipt and not when earned. For example, contributions by an employer to a qualified pension or profit-sharing plan on behalf of an employee are considered deferred compensation. Such contributions will not be taxed to the employee until the funds are made available or distributed to the employee, usually upon retirement or separation from service.

Congress snuffed this out by freezing the law of private deferred compensation plans in place with the principles set forth in regulations, rulings, and judicial decisions in effect immediately before the publication of Prop.

Under this rule, participants in their first year of eligibility have up to 30 days after they became eligible to participate in the nonqualified deferred compensation plan to make their deferral election with respect to compensation for services to be rendered subsequent to the election.

Under the new law, if a deferred compensation plan does not comply, deferred amounts will be includable in income and will be subject to a penalty of interest at the underpayment rate plus 1 percent, and an additional 20 percent tax penalty.

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